A report on tax avoidance by the Commons Public Accounts Committee has urged a ban on external accountants working inside government.

The recommendation aims to stop them telling clients about tax loopholes they find while working there.

The MPs said HM Revenue and Customs (HMRC) was in a "battle it cannot win" against the accountancy firms who have thousands of people giving advice.

HMRC said it was "aggressively fighting" tax avoidance and "winning".

In its latest report on tax avoidance, the committee turned its attention to accountancy firms after previously criticising multinational companies, including Starbucks, Amazon and Google, for the amount of corporation tax they paid.

The MPs said accountants were being seconded to work in the government to advise on changes to tax law but using the position to glean inside knowledge and tell businesses how to avoid tax. The MPs want the practice stopped.

'Conflict of interest'

They also called for a ban on firms being used by the public sector if they had been selling tax avoidance schemes.

Committee chairwoman Margaret Hodge said the practice represented a "ridiculous conflict of interest".

She said: "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government."

“Start Quote

The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government”

End QuoteMargaret Hodge MPPublic Accounts Committee

The committee's report suggested that tax officials were outnumbered by well-resourced accountancy firms in key areas, such as businesses transferring their profits overseas in order to pay less tax.

It said the "big four" accountancy firms employed about 9,000 staff and earned £2bn a year from their tax work in the UK.

The report said: "We have seen what look like cases of poacher turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay.

"We are very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax."

The committee said HMRC was involved in a "never-ending game of cat and mouse" with the big accountancy firms over the issue, and added that UK tax law was "hopelessly complex and outdated".

Jim Harra, director-general of business tax at HMRC, told the BBC: "Clearly they [tax accountants seconded to the government] do go back out with some expertise and they do advise on how to use the legislation. We watch very carefully what advice accountants are giving to their clients.

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"Provided that advice is how to use the legislation in accordance with the way Parliament intended it to be used, then we have no problems with that."

HMRC said that the government had announced last year it would invest a further £77m to expand the Revenue's anti-avoidance and evasion work.

An HMRC spokesman said: "The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.

"Since the end of 2012, we have won 11 tax tribunal cases against avoidance schemes, two of which were against large corporates.

"In the last three years alone, we have litigated more than 50 major avoidance cases, protecting billions of pounds of tax in the process."

'Strong professions vital'

Bill Dodwell, head of tax policy at Deloitte, said his firm was doing nothing wrong. He told the BBC: "We help companies pay the tax that is due."

The Institute of Chartered Accountants in England and Wales (ICAEW) said there was already international co-operation to tackle tax avoidance through the Organisation for Economic Co-operation and Development.

"The role of accountants is to help their clients pay the right amount of tax under the law," the ICAEW said.

"When it comes to strengthening tax systems, strong accountancy professions are just as vital as strong national rules and tax authorities. Accountants can help improve and strengthen tax rules."

Tax avoidance is the legal use of the tax framework to reduce the amount of tax payable whereas tax evasion is against the law.

Specialists in the field sometimes use the term "avoision" to refer to grey areas.

Comments

Comment number 865.

michellegrand27th April 2013 - 2:47

You can tell when it looks like a Duck, and sounds like a Duck, yet there are plenty of posters insisting that it's not a duck, or that you've got ducklings of your own, or that Labour didn't do anything about the ducks, as though that made it all OK. We're squeezing a small amount of benefit fraud, and ignoring the £Billions the rich are stealing

Comment number 863.

Paul27th April 2013 - 1:19

"rent out all in negative equiety, have a monthly income because of the rent. Cant claim benefits, am going bust but computer says no!! But we hand out money to aliens"

You must be living that workless rental income dream you saw advertised for seven years on the BBC at taxpayer's expense. What portion of a population can do no work and and yet still collect money? I'm glad you failed

Comment number 862.

Golgotha27th April 2013 - 0:18

74.Neil

"It's not rocket science. Hong Kong has 95% tax compliance, because it's code is only 4 pages long with a 15% flat tax."

Not true, its salary tax structure has several different rates ranging from 2% to 17% after deductions Taxes are capped at 16% of gross income, so this rate is applied to upper income returns if taxes would exceed 16% of gross otherwise. Not exactly a flat tax.

Comment number 861.

michellegrand27th April 2013 - 0:00

Some tax 'avoidance' as people put it, is government policy. ISA's Child care vouchers, share save. These are not the same as paying only £11,000 Corporation tax (News International), or avoiding a £6 billion fine (Vodaphone). HMRC goes after small fry, the big boys, along with crooks and criminals escape

Comment number 860.

news_lad26th April 2013 - 23:45

Only 50 cases in 3 years!? Anyone reading the papers today knows that they're only discovering the tip of the iceberg of tax avoidance! Yet the inland revenue just plods on, never improving inself, except when policy is forced through by government. The last lot being tax credits, which is now being cut anyway.

Comment number 859.

Comment number 858.

kevin26th April 2013 - 23:09

A select committee won`t change any laws and labour MP`S if not in government can`t change much.All mp`s in safe seats should only be allowed to sit for parliament three times.This will stop the arrogant bunch ignoring the people and all in the lords should be thrown out because they are unelected.Lets go after accountants,what rubbish.Stop bashing the banks and fix the country.

Comment number 857.

Comment number 856.

David Beswick26th April 2013 - 22:50

The multi-national accountants were as responsible as the banks for the current economic crisis.They were signing-off balance sheets which did not balance and then were paid by the beneficiaries of this fictitious income to minimise tax paid on their fraudulent gains. Today, their spokesman said he believed that Starbucks has never made a profit in the UK. $3.2b sales for no profit? Dream on.....

Comment number 854.

Lynn26th April 2013 - 22:27

I have been using my own hard earned money to pay for my company’s patent maintenances. I feel hopeless that my accountant has no knowledge to help me claim R&D tax credits for my business. Although it is right thing to stop tax avoidance, I think that HMRC should also provide accountants the necessary knowledge to help innovation business owners.

Comment number 852.

riff7726th April 2013 - 22:22

@846 Spaced one.Absolutely correct. These corpratists now infest every area of UK Govt. policy. They advise both sides in privatisations, and take fees from both, just like the hedgies. Retired partners in the firms are non execs on the boards of govt. departments. The head of the home civil service is an ex-banker. CS political neutrality no longer exists.

Comment number 851.

John Stossel26th April 2013 - 22:13

849.Billythefirst I was wondering what your solution to our tax problem would be. Are taxes working at all, and if not, how would you improve our current system. What results do you expect from your measures?

Comment number 850.

Sheneval26th April 2013 - 22:01

I think the solution to all tax avoidance is to make it illegal to give advice about. or to use tax avoidance measures that were not specifically designed for your use by the Government - that way those who took advantage as described in the press over the last year would be aware they were breaking the law as would the financial advisors and accountants who would know the score.

Comment number 848.

Comment number 847.

himagain26th April 2013 - 21:31

Actually, poster John, Message 195 today, is some kind of mathematical genius. Look what he worked out all on his own. Something the entire machinery of Government has been unable to resolve in the last century, when income tax was invented to fund a few good wars.

HINT: If you can't beat 'em......ANY wageslave can join in: Get a Tax AGENT and instruct her that you want to become a "business".

Comment number 846.

SpacedOne26th April 2013 - 21:27

Tax accountancy is just the tip of the iceberg when it comes to this government bringing in people from outside government to design policy in areas where they have direct financial interests. The whole NHS Privatisation Bill was written by representatives of US private health companies, education policy has been written by people who then used what they had created to make money though academies.

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